This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Exchequer Secretary to the Treasury, David Gauke, speaks at HMRC's Stakeholder Conference on compliance
Thank you Teresa [Teresa Graham, independent chair for the event].
I’m delighted to be able to open the conference this morning.
In fact, I already recognise a few faces in the audience from HMRC’s first ever annual conference four months ago.
Which I know was a conference that a lot of people found worthwhile.
This event in fact, was organised directly off the back of it…
Because so many of you wanted to cover the issue of compliance in greater detail than we managed back in July.
Compliance — making sure that individuals and businesses of all sizes pay the tax they owe under the law — remains an incredibly hot topic.
And I don’t think – in the three and a half years since I became Exchequer Secretary – a week has passed without the issue attracting either public or media or political scrutiny.
And that level of scrutiny has been completely understandable.
Given the difficult economic conditions we’ve all faced…
And given the fact that the vast majority of the public pay the taxes that they owe, when they owe them…
It makes perfect sense that when certain individuals or companies aren’t perceived to be contributing their fair share to the public purse, that there will be public anger
But – in my view – what the public and media and political debate around compliance has often lacked, is balance.
It has often been misinformed.
It has often involved significant scaremongering.
And it has all too often portrayed the entire business world as something that takes away from society, rather than contributing to it.
So I want to start today’s conference by setting out the action the Government has taken – and is taking – in the context of achieving a balance.
We want to achieve a balance between delivering increasing amounts of tax revenues — which are absolutely necessary to cut the deficit and to secure the ongoing recovery…
While making sure that Britain becomes increasingly a great place to do business, as we can see so vividly in the reminders around us today.
And we want to achieve a balance between helping individuals and businesses to pay the right amount of tax.
While taking tough action against the minority — and it is a minority — who refuse to pay their share, by avoiding or evading paying the right tax.
Achieving the right balance will mean everyone contributing a fair share to our economic recovery.
And it will also mean that everyone has the opportunity to prosper from the growth and innovation of the UK’s businesses.
So what has the Government done and what are we still doing to help achieve this balance?
First, on increasing revenues to reduce the deficit, we’ve made sure that HMRC has all the necessary resources, and the necessary targets, to deliver ever more revenues from its compliance work.
And as a Government we’ve taken the decision on several occasions to provide additional resources to HMRC so that it can increase its compliance take.
In fact, we began taking such steps at our first major fiscal event after coming to office, the 2010 Spending Review. Where – despite the huge financial pressures on all Government Departments – we announced that we would reinvest £917 million worth of efficiency savings back into HMRC – over four years – to bring an extra £7 billion a year in additional revenues.
That’s £7 billion in addition to the £14.7 billion of compliance yield to which HMRC was already committed to bring in every year.
And in last year’s Autumn Statement, the Government announced it would invest an additional £77 million to enable HMRC to further tackle avoidance and evasion and bring in an extra £2 billion in 2014/15.
This impact of this combined investment of £1 billion mustn’t be underestimated.
It’s enabled HMRC to:
- Triple the number of criminal prosecutions
- To increase the revenue generated by its High Net Worth Unit, which has now raised £665 million in additional tax over the past four years
- To invest £50 million to train staff and to expand its anti-avoidance work, including a greater focus on transfer pricing
It’s enabled HMRC to:
- Invest £45 million in Connect technology, which has generated £2 billion in additional yield since 2008.
- To invest £6 million in a new centre of excellence to tackle offshore evasion
- To deliver a range of initiatives to reduce the level of tax credit error and fraud
It’s enabled HMRC to:
- Trial the use of debt collection agencies to increase its capacity to collect tax and tax credit debt
- To deliver more than 50 taskforces focusing on specific high-risks sectors and locations
- To run four targeted campaigns every year aimed at specific groups of taxpayer
And it’s enabled HMRC to:
- Use publicity to act as a deterrent to tax avoidance and evasion.
- Including vans driving around central London with a clear message to those breaking the law. Without any howls of protest.
And this £1 billion commitment – and those steps it has helped to support – have really paid off.
Since this Government came to office, HMRC’s compliance activities have brought in over £60 billion.
Which is an amount the Exchequer would have come nowhere close to achieving were it not for HMRC’s dedicated work.
Last year alone, HMRC generated £20.7 billion from its compliance activities, £2 billion above the target we set.
To put this figure in context, if none of this money had been collected, an additional 5p on the basic rate of income tax would have been required to cover the shortfall.
But our commitment doesn’t – or didn’t – end there.
At the 2013 Spending Review, HMRC weren’t exempted from the Government’s drive to find efficiencies in public spending – and they must find a five per cent saving to their budget in 2015/16.
But we did expand our investment in digital services to more than £200m by end of the same year, which will deliver the tax system for the 21st century that taxpayers expect. And further strengthening of HMRC’s compliance work means that we have set them a target of bringing in an additional £1 billion in compliance revenues in 2015/16.
So we continue to require top performance from HMRC in return for this commitment.
In 2014/15 we expect HMRC to deliver £23.5 billion in extra tax revenues and £24.5billion in 2015/16.
That’s an additional £8.8 billion for 2014/15 and £9.8 billion for 2015/16 in additional revenues, over and above the £14.7 billion HMRC was delivering at the start of this parliament.
That means that between 2010/11 and 2015/16, the five full years of Government spending covered by this Parliament, we will have increased HMRC’s compliance yield by almost 70 per cent, from £14.7 billion to £24.5 billion. And HMRC will have done this while having found net savings of 18 per cent of its total expenditure
This is the Government’s track record on supporting HMRC in the fight against non-compliance – and it is a record of which I am personally very proud.
But – as I said at the outset – we need to aim to create a balance here.
And while we absolutely want HMRC to focus its energy on ensuring maximum compliance…
We also want to make sure we create a tax system here which means that Britain remains a great place to do business. A great place for honest individuals and honest businesses to thrive, create wealth and pay their fair taxes.
So to support businesses we have reduced the main rate of corporation tax – over the last three years – from 28 per cent to 23 per cent.
And – by 2015 – we will have reduced that level to 20 per cent – the joint lowest level in the G20.
We’ve also cut the rate of corporation tax for companies with small profits from 21 per cent to 20 per cent.
We’ve introduced the ‘Patent Box’ which applies a tax rate of 10 per cent to profits from the development and exploitation of patents.
We’re providing £100 million in tax reliefs for creative and high-tech industries.
We’ve introduced the Seed Enterprise Investment Scheme, which offers generous tax relief incentives to investors in business start-ups.
We introduced an Entrepreneurs Relief in 2010.
So if someone sells or closes a business, they will only pay 10 per cent Capital Gains Tax on any qualifying profits.
And from April 2014, we are introducing an Employment Allowance that will reduce the cost of paying Employer National Insurance Contributions by up to £2,000 for businesses and charities.
These actions are all about encouraging business to invest.
To invest in growth.
And in jobs.
And they’re measures that have seen companies keep their operations here.
That have seen companies move their operations here, as has happened with WPP, Rowan and Lancashire.
And they’re measures that have seen companies expand their operations here – the Patent Box for example, was crucial in securing an investment of £500m by Glaxo Smith Klein, which is set to create 1,000 new jobs in Cumbria.
But having a competitive tax system isn’t just about setting low levels.
It’s about making sure that those levels are effectively and fairly managed.
And that’s why we’re working hard to improve tax transparency.
To cut loop-holes.
And to grant HMRC new powers to tackle avoidance and evasion.
For example, on improving tax transparency, just last week the Prime Minister announced the Government’s commitment to publish a register of the beneficial owners of limited companies.
Which is a move that will discourage tax evasion, by removing the cloak of secrecy that currently surrounds company ownership and enables some individuals and businesses to keep the full picture of their income, profits and assets hidden from HMRC.
Just over two weeks ago, I signed a tax sharing agreement with Jersey and Guernsey that will make sure that financial information on UK taxpayers holding accounts in Jersey and Guernsey will now be automatically provided to HMRC to make sure that the correct amount of tax is being paid.
This means that the UK now has agreements in place with all Crown Dependencies to share tax information automatically — helping HMRC to close in on those who seek to hide their wealth offshore.
On closing loop-holes, this year we introduced an annual tax on ‘enveloped dwellings’ to clamp down on wealthy individuals who own mansions through offshore companies to avoid paying tax.
And we’ve also acted to give HMRC the necessary powers to deter the promotion and use of aggressive tax avoidance schemes by introducing a General Anti-Abuse Rule in July.
We are also setting global standards for dealing with tax avoidance and encouraging international co-operation to tackle tax avoidance, close loopholes and identify abuse.
Our legislation requiring disclosure of tax avoidance schemes, and the way that HMRC has developed relationships with large business, have both been endorsed by the Organisation for Economic Co-operation and Development and adopted by other countries.
We have used our Presidency of the G8 this year to focus on strengthening international tax standards and working on greater international tax information exchange to tackle tax havens.
This will build on work that is already underway in the OECD and maintain the momentum set by the G20.
I – for one – expect to see HMRC bringing in ever-more revenues in their continued crackdown on tax avoidance and evasion.
Which should be combined with delivering an ever improving, more transparent customer service, with a digital offer for all taxpayers.
This will help us to achieve the right balance between delivering increasing amounts of tax revenues whilst ensuring that Britain continues to be a great place to do business.
And it will help us to support the honest, hardworking majority of families and businesses that want to pay their taxes.
I’m under no illusions that this will be easy to achieve…
But I’m confident that HMRC are in a strong position, with the capability to achieve those goals.
As an organisation, they need to continue to be more transparent and to listen to the public and tax professionals – such as yourselves – through events like today.
I know that the senior HMRC team here today – Edward, Jim and Jennie – want to share with you, in much more detail than perhaps they’ve done before, exactly how they’re balancing risks and opportunities among the different types of taxpayers.
And I know that they want your views on what more could be done, as well as what could be done differently.
And I’m sure that with your support – and your constructive criticism! – they will be able to deliver on the challenging aspirations we’ve set them.
So thank you for listening.
And I’ll look forward to taking your questions.